Calculate the payback period the npv and the irr

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Reference no: EM13213009

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $733 per set and have a variable cost of $363 per set. The company has spent $153,000 for a marketing study that determined the company will sell 75,300 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,800 sets per year of its high-priced clubs. The high-priced clubs sell at $1,230 and have variable costs of $570. The company will also increase sales of its cheap clubs by 11,300 sets per year. The cheap clubs sell for $343 and have variable costs of $128 per set. The fixed costs each year will be $11,230,000. The company has also spent $1,030,000 on research and development for the new clubs. The plant and equipment required will cost $24,710,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,530,000 that will be returned at the end of the project. The tax rate is 30 percent, and the cost of capital isa 13 percent.

Required:

Calculate the payback period, the NPV, and the IRR.

Reference no: EM13213009

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